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Comparative testing of pure methanol, methanol/water blends and isooctane in single-cylinder engines has demonstrated that through proper utilization of methanol's fuel-lean combustion characteristics it may be possible to reach CO emissions of the order of 0.1 percent and NOx emission levels of less than 100 ppm in the raw (undiluted) exhaust. Exhaust treatment to remove unburned methanol and partial oxidation products might be required. Concomitant with decreased emissions are specific energy consumption improvements estimated to be in the range of 26 to 45 percent better than achievable with current gasolines and the associated low compression ratio engines and emission control systems. These energy consumption improvements are obtained by virtue of efficient lean operation and by utilizing the high octane values of methanol/water blends at high compression ratios.